1 Person Plan

[waid10]

Hi. Superintendent of a School Board has an employment contract. As part of his contract, there is a paragraph that states that the "School Board will make a contribution for the Superintendent's benefit to an arrangement invested in an annuity selected by the Superintendent and satisfying the requirements of Section 401(a) of the Internal Revenue Code, in the amount of $10,000 with Superintendent being vested immediately." The paragraph goes on to state that the School Board will make this contribution annually.

It appears to me that this paragraph is creating a governmental plan with one participant. I think this is permissible due to the governmental plan's exemption from the nondiscrimination and minimum participation rules of ERISA. But what about the plan document requirement?

Any thoughts?

[Below Ground]

Government Plan? You say it is for a school, which I think makes it a 403(b) Plan. I think you need to first review what type of plan this is as it does not sound like a "governmental plan".

[QDROphile]

I agree that you should get clarification about what was intended, but it could be exactly as specified. The combination of "401(a)" and "annuity" is what causes question, but is not impossible, especially since "annuity" seems to be described as an investment. A plan document will be required either way. Whether or not an annuity is a good investment choice is also a question, but not for me to answer. Another question is whether or not the school district has state law authority to adopt the plan, whatever it is. 403(b) plans are traditional for schools and a sub-state level government entity often does not have authority to adopt its own 401(a) retirement plan.

[jpod]

The School Board may be able to make it's life much simpler by making the annual contribution under a 457(b) plan (rather than a 401(a) plan). The insurance company issuing the annuity should be able to provide some sort of model 457(b) plan document. As previously stated, need to make sure the arrangement is not in conflict with pertient state laws and regulations.